With March 31 fast approaching, you must be receiving reminder mails from your company’s accounts/HR department asking you to claim any reimbursements you are entitled to and provide bills for the same before the end of the financial year. However, while submitting the proofs, make sure you only provide real bills, as giving fake proof can land you in trouble with the tax department. You could end up with a tax notice for under-reporting of income.
Often companies reimburse certain expenses of employees which are exempted from tax up to specified limits as per the Income-Tax Act, 1961. Paying an employee through such reimbursements instead of via a corresponding amount added to salary allows the employee to receive the sum exempt of tax. Consequently, it results in lower tax outgo for the employee. However, such tax exempt reimbursement is permitted by the income tax department only in case of real expenditure incurred on specified activities.